Macy’s (M) practically owns the holiday season. The department store that is famous for its luxury goods is also the source of nostalgia for many consumers who enjoy watching its traditional Thanksgiving Day and Christmas Day parades.
In cities like New York, San Francisco and Chicago, pilgrimages to view Macy's extravagant holiday window displays have also been a tradition for many people for decades. However, as the holiday season draws closer to Christmas, Macy’s revealed that it recently faced an unexpected dip in its sales.
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In the company’s third-quarter earnings report for 2024, Macy's revealed that its total net sales decreased by 2.4% year over year.
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While Macy’s, which owns Bloomingdale's and Bluemercury, saw sales increase in women’s apparel, fragrances, and certain luxury products, it saw weakness in consumer spending on men's non-active apparel, handbags, and home sales.
Macy’s flags a major source of the problem
During an earnings call on Dec. 12, Macy’s Chief Financial Officer Adrian Mitchell claimed that sales were negatively impacted by recent “unseasonably warmer weather.”
“Cold weather is really coming online sequentially a bit later than what we had expected,” said Mitchell.
According to the National Weather Service, winter 2024-25 is expected to see “warmer than average temperatures and near to below normal rainfall” in the southern and eastern parts of the U.S.
Mitchell also said that the company is noticing that its customers are becoming “very value-oriented” as it spotted higher sales of clearance items and positive responses to discounts.
“In this holiday season, we're navigating a competitive discretionary environment,” said Mitchell.
Macy’s makes a drastic decision after sales dip
As Macy's faces a decrease in sales, it has opted to rethink its store footprint. The retailer plans to close about 65 stores by the end of January 2025, up from the previously estimated 50 store closures at the beginning of the year.
During the earnings call, Mitchell stated that these closures will only affect “underperforming stores.”
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“These are places where the economics are not as favorable,” said Mitchell. “These are places where customers have shifted away from those centers to shop. And these are stores that are just incredibly difficult to run.”
The store closures are a part of Macy’s new “Bold New Chapter” strategy, which was announced in February 2024. The strategy aims to strengthen Macy’s nameplate, accelerate luxury growth and simplify and modernize end-to-end operations.
To achieve these goals, the plan involves closing 150 underperforming Macy’s stores by the end of 2026.
Consumers have been altering their spending habits
Macy’s decline in sales comes during a time when consumer spending during the holiday season is expected to reach a new record.
According to a recent survey from the National Retail Federation, consumers are expected to spend about $902 per person on “gifts, food, decorations and other seasonal items,” during the holidays this year.
This is $25 more than what each consumer was predicted to spend in last year’s survey, and $16 higher than the previous planned spending record of $886 per person in 2019.
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While holiday spending is expected to skyrocket, consumers have been altering their shopping habits in response to inflation and higher costs of living.
According to a recent report from GlobalData, about 42% of U.S. shoppers are opting to shop for cheaper brand alternatives in retail due to rising inflation. Also, almost 47% are conducting online price comparisons and are leveraging digital platforms to make “informed purchasing decisions.”
In addition, 24.5% of shoppers stated in the report that they plan to reduce spending on clothing and accessories, while 21% said they will cut spending on footwear. A third of shoppers also said that they have recently opted to purchase secondhand or pre-loved items, a trend that is mostly driven by a desire to save money.
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